This is what SA must do to get off the ‘grey list’ by January 2025

The government has noted the Financial Action Task Force’s (FATF) decision to list South Africa as a “jurisdiction under increased monitoring”. 

The FATF added South Africa and Nigeria to its “grey list” of countries under special scrutiny to implement standards to prevent money laundering and terrorism financing.

The task force is an intergovernmental organisation that underpins the fight against money laundering and terrorism financing by setting global standards and checking if countries respect them.

Being added to the “grey list” is a setback for government, which has been trying to address shortcomings identified by the FATF.

“Following engagements with the FATF, it assessed the country needed to make further and sustained progress in addressing the eight areas of strategic deficiencies related to the effective implementation of South Africa’s anti-money laundering/combating the financing of terrorism (AML/CFT) laws as set out in the FATF’s statement,” said National Treasury.

South Africa is expected to address the deficiencies by the end of January 2025.

The eight areas of strategic deficiencies identified by the FATF require the country to: 

• Demonstrate a sustained increase in outbound mutual legal assistance requests that help facilitate money laundering/terrorism financing (ML/TF) investigations and confiscations of different types of assets in line with its risk profile.
• Improve risk-based supervision of designated non-financial businesses and professions (DNFBPs) and demonstrate all AML/CFT supervisors apply effective, proportionate and effective sanctions for noncompliance. 
• Ensure competent authorities have timely access to accurate and up-to-date beneficial ownership (BO) information on legal persons and arrangements and applying sanctions for breaches of violation by legal persons to BO obligations.
• Demonstrate a sustained increase in law enforcement agencies’ requests for financial intelligence from the Financial Intelligence Centre for its ML/TF investigations.
• Demonstrate a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of TF activities in line with its risk profile. 
• Enhance its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes in line with its risk profile.
• Update its TF risk assessment to inform the implementation of a comprehensive national counter financing of terrorism strategy.
• Ensure the effective implementation of targeted financial sanctions and demonstrating an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.

Finance minister Enoch Godongwana said Treasury is committed to work with the FATF to swiftly and effectively address all outstanding deficiencies and strengthen the effectiveness of its AML/CFT regime. 

“Government recognises addressing the action items will be in the interest of South Africa, and that doing so is consistent with our existing commitment to rebuild the institutions weakened during the period of state capture, the effectiveness of which is essential to addressing crime and corruption.”

Godongwana said the action items will form part of the broader commitment by  government to combat financial crime, corruption and state capture. 

He said there are no items on the action plan that relate directly to the preventive measures in respect of the financial sector. 

“This reflects the progress in the application of a risk-based approach to the supervision of banks and insurers. 

“National Treasury therefore expects the increased monitoring will have limited impact on financial stability and costs of doing business with South Africa. This will, however, be monitored closely. Importantly, the costs of increased monitoring will be substantially lower than the long-term costs of allowing the economy to be contaminated by the flows of proceeds of crime and corruption.”

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